Piracy is one of the main headaches that digital distribution brings to media and entertainment. Linius Technologies hopes to become the remedy to that.

Linius uses blockchain and what it calls its “video virtualization technology” to solve piracy woes, build in payment gateways, and rectify ways to better automate and systematize royalties and more. The system transfers video in a manner that allows all parties to monitor the transfer and use blockchain to verify that the transfer is legitimate before any video can be played. The system is already being used in Hollywood and the company claims it will be partnering with a major studio very soon.

Potential benefits of the Linius Blockchain include complete auditability across the distribution chain; removing intermediaries and expanding margins; the ability to self-distribute and monetize content with tracking, royalty payments and audits in one dashboard; no playing of video content without valid authorization by two parties; and the ability to get payment from peer-to-peer interactions.

CHRIS RICHARDSON: Really, it perhaps is worth backing up and talking about what Linius’ core technology is, and then I think the target audience becomes easier to understand. Basically what Linius does is we virtualize video. This happens regardless of the existence of blockchain. What video virtualization does is it separates the actual data of the video, the ones and zeros that make up the codec where you put a red dot here, green dot here, play some sound, whatever it may be, from the piece of the video that represents the play out, the actual video itself. Once you separate those things, the video part that you play out becomes a very tiny file, about the size of a text file, a large text message for example.

We have tons of applications just for that base underlying technology. We work in video search, we work in anti-piracy, we work in the security and defense space for the military. There are really dozens of applications just for that underlying technology in and of itself.

The point of blockchain as it applies to this is when you look at the fundamental promise of blockchain, of course it is very popular right now and people are using it for all manner of applications for which it was not necessarily designed. The core in their underlying tenant that it provides protection for digital assets, which you can then share, transfer, sell, claim ownership over in a predictable, transferable, controllable way over an un-trusted network. That core premise, at least as far as I know, is really it’s only being used for the cryptocurrencies. We’re starting to see some stuff happen with digital versions of physical assets with real estate deeds and these sorts of things, but, when it comes to sure digital assets, you’re not seeing very much.

We believe a large part of that has to do with the sheer physical size of a digital asset. A coin, a bitcoin, any coin you want to use, any cryptocurrency, is physically a very small thing. It’s a few k of text characters. When you start creating a ledger around the and building up the blockchain … bitcoin’s blockchain, last I looked, was already over 150 gigabytes in database size. That’s where the blocks are only storing these tiny cryptocurrency keys. If you start actually trying to protect real digital assets, say a photograph, you take a photograph on your iPhone, that’s easily 10 megabytes. If that’s really going to be genuinely protected and now just have a ledger pointing to a remote asset, really put the asset in the block the way you do with a cryptocurrency, then quickly the size of the database becomes untenable.

Certainly, when you’re talking about video it would never work. I know, each video could be hundreds of megabytes. If you had every transaction I share with my friend, and he pays me, and now he owns it so I can’t play it anymore, you’d need an unconceivably large database sizes in the blockchain instantly. Because we virtualize the video, the data itself never needs to be included. The data that sits on its own is completely unusable and unplayable without the virtual video file to make it play. As I said, that virtual video file is a tiny fraction of the size of any other digital asset. It’s really measured in small digits of k, and so it becomes possible for the first time to really achieve the true promise of blockchain and provide a distributive mechanism for owning digital assets and controlling them and sharing them in the context of video. That was long-winded but hopefully it answered the question.

BLOCK TRIBUNE: Is piracy a big issue as far as video transfers?

CHRIS RICHARDSON: Absolutely. Piracy is a giant issue. Theft in the context of video piracy, it’s not like walking into a convenience store and stealing a Twix bar. You don’t really know exactly what you lose to piracy, but the latest, most sophisticated research around this which came out from Cornell last year looked at the entire ecosystem of piracy. It takes into account the fact that piracy has some amount of upside. Once somebody pirates an asset and gets it out there, words spreads, and some people will go watch a movie because of that. Takes into account the long tail of piracy of people who are going to pirates no matter what and they were never actually going to spend money on watching the film, whether that’s through streaming or the cinemas or whatever. But of course, it takes into account what the actual loss is from people who otherwise would’ve paid to watch a film.

The research that came out of Cornell said that basically 20% of, I think the number’s actually 19.2%, of box office sales are lost to piracy today. The global box office is over 60 billion US dollars. We’re talking about an impact that is at least 12, 13 billion dollars at the low end of estimation.

BLOCK TRIBUNE: Are these files stolen on the transfer or are they stolen because somebody hacked into a computer that had them stored on a hard drive?

CHRIS RICHARDSON: They’re stolen all of those ways. You’re stolen from taking the file from the computer. You’re stolen from hijacking the stream. You’re stolen from the back end of the studio, like the “Game of Thrones” episodes that walk out the back door before they’re ever been streamed. All of those places, and in all of those places the combination of virtualizing the video and attaching the blockchain prevents that theft.

BLOCK TRIBUNE:You talk about, in the release that I saw, about intermediaries being removed from the equation, thereby increasing the profits. Who will be removed from the revenue stream?

CHRIS RICHARDSON: Well, really the movie distribution business today is extraordinarily complicated, and if you look at the path from studio to end consumer, there is a distribution chain there that’s probably four, five, six entities deep where you go from the actual production house of the film, to the studio, to the first tier distributor, to their second tier distributors where it ultimately gets sent to the cinema, ultimately gets sent to the DVD printing houses, and then finally to the retail distributor, out to the Netflixes, the Apples of the world. That first tier relationship is probably still going to exist, because you have a lot of cross-border business rights that need to be negotiated. You’d still have, for example, Warner Brothers distributed to Village Roadshow to get the distribution into Australia. Beyond that initial sort of “country-level” requirements, once you get down into what value are the other distribution partners adding, you really can eliminate the middle man because the value is completely unclear, and you don’t need to establish truck identity in the middle because you have the truck with the blockchain.

BLOCK TRIBUNE: You also talk about peer-to-peer monetization. I assume that that’s because of the blockchain that you’re able to affect that?

CHRIS RICHARDSON: That’s right. Today, if I get a movie in a digital format somehow, and I actually own it, and I paid for it, and life’s great, I can give it to my friend. Say, “Hey, friend, go watch this movie.” Technically, if I do that, I should remove my version and give it to my friend and give up my version. Blockchain enables that to happen. What it also enables is for the financial transaction associated with that to be multi-tiered. You can imagine business models going forward where a studio says, “Hey, we know these x thousands of people in the world are movers and shakers, or the influencers, that get word out about a movie and really drive interest.” Maybe we can start creating a model where we actually just give them the movie, and they share it over the blockchain, and say, “Hey. Here’s the latest version of the movie. You’re getting a pre-release access to it because we love you, and it’s $2.00 to rent it,” or whatever.

Then they get a share of the profits, because all the royalties all the way back through the chain be distributed and counted for in the blockchain ledger.

BLOCK TRIBUNE: That’s fascinating. That’ll really set the movie theaters on fire, won’t it, because that’s a further slice into their pie?

CHRIS RICHARDSON: Well, it’s interesting. It’s a little hard to say. I mean, movie theater revenue’s been declining for a while. I certainly personally always believe that there will always be interest in cinema for certain types of films. You look at the stuff that Christopher Nolan’s doing. You look at the stuff that Quentin Tarantino’s doing where they’re bringing out the old Panavision, resurrecting old film formats because of the cinematic value of that. I don’t think that’s going away. I think that’s actually going to increase. Certainly the long tail of people who are building home cinemas and increasingly watching things on their 70 inch, 90 inch whatever televisions at home, yeah, that is going to have an impact on everyone I think.

BLOCK TRIBUNE: Does Hollywood want financial clarity in its transactions? I mean, we’ve seen cases with the Art Buchwald case and a few other things where they have sort of fudged the numbers and things made millions of dollars yet there were no profits. Is this something that Hollywood is going to embrace?

CHRIS RICHARDSON:That’s a very good question. Hollywood is sort of a broad term, and absolutely I think everybody understands that a lot of the reason that films are financed the way they are and the reason these corporate entities exist the way they do are to minimize tax liability. I feel quite certain that some people will feel that any enhanced clarity will be potentially damaging to that. Equally, there are plenty of other people who really do want the clarity, including, for example, big name stars who are paid out on royalty basis and want to know for sure what actually gets played. I think both sides of that coin are going to have opinions at the table, but I can tell you for sure, we’re talking to most of the major studios, and they might not all have exactly the same idea of what they want to do with blockchain, but they’re all very interested in moving this direction.

BLOCK TRIBUNE: Are you going to be doing an initial coin offering?

CHRIS RICHARDSON: We have not decided yet. In fact, I was just discussing that with our board of directors. If we do that, it’ll be sometime mid year. It’s definitely not committed at this point.

BLOCK TRIBUNE: What is your background?

CHRIS RICHARDSON: My background is Internet technology, mostly really some deep fundamental technology. My first startup was internet routing software, and I moved on from there to do other networking startups, wifi, ethernet, core internet technology companies. In 2011, I moved more into the video end of things, and I’ve been doing tech video startups since then.

BLOCK TRIBUNE: When will your studio announcement arrive?

CHRIS RICHARDSON: I would expect the next announcement will be within a couple weeks.